July 12, 2022
If you are seeking ways to fund your business and increase sales, you’re in the right place. This will very certainly necessitate additional money at some point to meet expenses and accelerate expansion in the future. Due to the multiple hurdles that can arise on the path to extra financing, this is frequently more difficult than anticipated.
Only 49% of those who requested relief funds were granted, according to our State of Small Business Survey for 2021. The following were the top reasons for the rejection or lack of communication for the other 51%:
– Operating for a short time
– Poor credit history (Ways to Improve Your Small Business Credit Score)
– Incomplete loan documents
– Not enough financial documentation
While these findings were particular to PPP and SBA Loans, which should be easier to qualify for, the same flaws can be found in any sort of funding search. So, how can you get ready to pitch your company, ask for loans, or explore other funding options? Begin with a growth strategy.
Using your business plan, create a strategic expansion plan.
The very first step is to ensure that you have a strategic expansion plan in place. Essentially, this is a business plan that focuses on the methods you’ll need to adopt and the milestones you’ll need to reach in order to expand your company.
Concentrate on your financial projections.
A financial prediction is the most important part of this plan. This will ensure that, depending on your estimates, you know how much money you’ll need to fund your expansion. It will also assist you in demonstrating how you intend to utilize the funds once they have been obtained.
Even a rough allocation of funds (i.e., which expense categories will be used and when) can go a long way toward convincing investors and lenders that your plan is viable. This is certainly subject to change after you receive the funds and begin to use them. However, planning ahead of time and thinking through your usage will help you better manage your money and maximize your investment.
Your growth strategy is actually a tool for growth.
When your planning is done, you will not only have a fantastic tool for managing your firm, but you will also have a wonderful tool for obtaining the money you require to expand your firm. You’ll need to show a professional, well-organized strategy with realistic financials whether you’re running a small home-based business or a major biotechnological firm.
You can rest assured that if you use LivePlan, you’ll be on pace to create an investor- and loan-ready business plan. Over the years, we’ve helped our customers acquire hundreds of millions of dollars in investment capital and small business loans, and we’d like to help you get the cash you need to expand your company.
After you’ve created your plan, you’ll need to decide which funding options you want to pursue. Much of your selection is based on how much money you need, how much risk you’re ready to take, and how easily specific funding sources are available to your company.
To raise cash flow and improve growth, you’ll most likely use a combination of funding strategies. Here are a few popular choices to consider.
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Friends and family financing
When you accept funding from members of your family or social network, this is known as friends and family finance. The funds may be provided as a loan or in exchange for stock.
However, keep in mind that obtaining funds from friends and family can be difficult and emotionally draining.
Giving your family a copy of your strategic growth plan—your business plan—so they can see that you’re thinking about your future can be a good start. We strongly advise you to get legal counsel to assist you and your family or friends in establishing a successful business arrangement from the start. Nothing is more vexing than relatives and friends feuding over money and business.
Crowdfunding is when you inquire a group of people to donate a set amount of money in exchange for various rewards for a specific cause or project. The three primary categories crowdfunding can come under are equity, contribution, and debt.
Keep in mind that each crowdfunding site is unique and has its own set of restrictions for raising and acquiring funds. So, before committing to a single platform, carefully consider your options and read the tiny print.
Angel investors are wealthy individuals who invest in businesses (generally startups) in exchange for convertible debt (debt that can be converted into equity at a later date) or ownership equity (a residual claim on ownership assets). They will usually invest less than $2 million, but more frequently between $50,000 and $250,000.
Angel investors may not be the ideal option if you do not have a business exit strategy. These investors are looking for businesses to invest in so that they can profit from their investment.
Angel investors may be the appropriate fit for you if your goal is to build your firm and sell it, buy new firms, or even go public. However, if your goal is to grow your company, own it, and run it for the rest of your life, you might want to reconsider approaching angel investors. Check out this angel investor directory if you’re looking for local angel investors.
Bootstrapping a business simply means funding it with your own money, whether through personal savings, personal loans, SBA-backed loans, credit lines, or credit cards. In the next sections, you’ll learn more about loans.
You don’t give up any ownership or stock in your firm when you bootstrap, as you would if you took angel or venture funding.
Bootstrapping also implies that you must begin generating revenue for your firm as soon as feasible in order to continue to fund it on your own.
Bootstrapping has the advantage of giving you entire management and ownership of your company. Moonlighting and working on your concept on the side while still working a normal job is a common example. Tim Berry, the founder of Palo Alto Software, started the company from the ground up.
A bank loan is a medium- or long-term financing option. The bank determines the loan’s fixed term (for example, 3, 5, or 10 years), the interest rate, and the time and amount of repayments. It’s usually best to work with a credit union or a local bank so you can work directly with someone on your loan application.
In conjunction with your business strategy, the bank will require you to offer some form of loan security (“collateral”). In the case of a startup, however, this security is frequently offered in the form of personal guarantees supplied by the founder.
SBA-backed loans (U.S.)
The Small Business Association of the United States has a number of lending programs available through partnering banks across the country. These programs are tailored to small enterprises and are often less leaky and easier to use. You’ll need to establish a relationship with a loan officer at your local bank, credit union, or nonprofit financial intermediary to access the programs because the SBA doesn’t really execute the lending.
Working with your local SBDC (Small Business Development Center) office is a good idea if you want to acquire an SBA-backed loan. SBDCs are funded by the state and federal governments to assist you for free. Find your local SBDC office here, and check out Bplans’ guide to small business loans to make use of their knowledge.
A venture capitalist (also known as a VC) is a person who invests in a company’s startup or development by giving funds. VCs are searching for a greater rate of return than traditional investments can provide. VCs and VC companies often invest $500,000 to $10 million in their ventures. To even consider bringing in VCs, you must be developing an extremely high growth strategy.
Seek money that is appropriate for your company’s growth strategy.
We wish you the best of luck in your new or expanding enterprise, regardless of the funding source or mix of sources you choose. Just remember to look for finance that is appropriate for your company and to tailor your growth strategy and pitch materials to that option. Check read this article on the top forty ways to fund your business if you’re looking for more funding options.
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